State pension crisis fix is pushed back again

Published: Friday, Nov. 8, 2013 10:17 a.m. CST

By Ray Long and Hal Dardick — Chicago Tribune

SPRINGFIELD (MCT) — As expected, Illinois lawmakers left the Capitol on Thursday without a resolution to the state's $100 billion public worker pension debt and without a clear time frame for reaching an agreement to rein in the costs of the nation's worst-funded retirement system.

The pressing issue remains on hold as legislative leaders try to negotiate a solution. The message repeated throughout the week is that the next key step is getting answers from number crunchers projecting how many billions of dollars can be saved by each potential tweak to complex pension plans that could affect hundreds of thousands of current and retired government workers.

"We're waiting for the experts," House Speaker Michael Madigan said as he walked into his Capitol office.

Before leaving, lawmakers did send Democratic Gov. Pat Quinn a measure to deal with the Chicago Park District's pension shortfall, a win for Mayor Rahm Emanuel.

In Springfield, there are several provisions being discussed. Among them: providing a 401(k)-style option for some current and future workers; phasing in a higher retirement age for many workers; and giving more help to longtime, low-wage workers. The expectation is that the framework of a 401(k)-like option would be roughly cost-neutral, but people familiar with the negotiations say the biggest calculations include the other concepts.

Those ideas come on top of a pension framework put together by a bipartisan, House-Senate panel. The group suggested cost-of-living cuts, a freeze of one-to-five years of those annual pension bumps and limiting how much of a salary could count toward a pension. Also suggested was cutting the amount of money workers would have to kick in toward their retirement in the hopes of passing constitutional muster.

All told, the earlier provisions were estimated as saving as much as $138 billion over 30 years. Now number crunchers are turning their calculators toward the latest ideas under consideration by leaders. Lawmakers also must decide how much of the projected savings could be immediately poured back into the pension system if changes are made.

It was a challenge to get to this point. Madigan had pushed through his chamber a plan worth more than $160 billion that is aimed at bringing the system to full funding in 30 years. Senate President John Cullerton had won passage of his own plan. It came with the endorsement of worker unions but saved the state less: $58 billion over 30 years and funded the system at 90 percent.

Neither plan passed both chambers. Back when Quinn faced a potential primary challenge from Bill Daley, the governor suggested the little-used conference committee approach to the pension problem. The governor continues to want a pension bill, but has toned down his rhetoric with lawmakers since Daley decided not to run.

As with many big issues, any deal requires agreement among the four leaders. Lawmakers are not scheduled to return to the Capitol until January, but a return in a few weeks remains possible. "Most people feel we should vote on the bill when we have the votes," Cullerton said.

But they've learned from experience that they need to get the numbers right.

More than a decade ago, then-Gov. George Ryan and legislative leaders sweetened the pot of benefits to induce workers to retire early. More than 11,000 people took the deal, and the costs went through the roof.

Even after Madigan's latest pension plan passed the House last spring, a mistake in the cost savings estimates was discovered. The savings ended up about $24 billion less than lawmakers believed.

But there's political math involved too. In the Senate, Democrats hold a 40-19 majority, but many Democratic members are reluctant to cut the pension benefits of unionized government workers too deeply.

Cullerton has said he hopes to supply as many as 18 votes and wants Republican leader Christine Radogno to provide 12 to hit the minimum 30 to pass the Senate.

Radogno said it is important to complete a deal soon. "It will inject some stability into our state economy," Radogno said.

Also Thursday, the Senate sent to Quinn a measure to overhaul Chicago Park District pension benefits.

The bill, following negotiations between workers and management, would require employees to pay more, the district to put more tax money into the retirement system and raise the retirement age for some workers. The bill also would freeze cost-of-living adjustments every other year for three years beginning in 2015.

Emanuel hopes it's a template for other, larger city pension systems — a view not shared by many unions.

"The cuts in this bill are unfair and unconstitutional," said Henry Bayer, the head of the state's powerful American Federation of State, County and Municipal Employees Council 31.

Mike Shields, president of the Chicago Fraternal Order of Police, and Tom Ryan, president of the Chicago Fire Fighters Union, also dismissed the idea that the Park District pension overhaul could serve as a model to preserve the system.